Investors are taking a bullish stance on ether, the token of the Ethereum network, as a shift from Proof-of-Work to Proof-of-Stake mining has some forecasting double-digit yields and dramatically diminished carbon emissions.
It’s finally happening: The long-awaited “merge” of the Ethereum network from a PoW to a PoS model is closer to becoming a reality than ever before. After last week’s successful test run on Kiln, Ethereum co-founder Joe Lubin is confident the new protocol can launch as early as spring.
- The evolution from Eth 1.0 to 2.0 aims to make the blockchain more secure, sustainable, and scalable.
- The transition to a Proof-of-Stake consensus mechanism allows a person to mine or validate transactions on the network if they have staked enough of the currency (right now 32 ETH will be required).
The merge is one aspect of the Ethereum Improvement Proposal (EIP) 1559.
Why it matters: Analysts project that Ethereum 2.0 staking yields could be 10% to 15%, an appealing number when you consider that most investments, when adjusted for current inflation, actually offer negative yields these days.
- “I am very bullish on ether for the summer as ether staking would offer returns better than real or inflation-adjusted yields in traditional markets after the merge,” trader and analyst Alex Kruger told CoinDesk.
Ethereum has maintained steady gains this week and, as of this writing, is sitting at US$2955.
Big picture: Ethereum is spearheading innovation in cryptocurrencies. Many predict the Ethereum 2.0 upgrade will spur more institutional adoption, particularly because of the environmental benefits.
- “Moving to proof-of-stake means it’s easier for institutions to adopt it since they don’t need to defend the energy consumption part of investment argument associated with bitcoin and proof-of-work coins,” said Ilan Solot, a partner at the Tagus Capital Multi-Strategy Fund.
The shift to PoS will reduce energy consumption by 99.95%, making its environmental impact negligible..